For decades, Britain has not built enough houses. Today, housing completions lie well short of the number required to stabilise the market, despite a strong economy.  

This lack of supply is widely diagnosed, but solutions are trickier. Interestingly, recent research has indicated that an existing government policy, Help to Buy, is having a strong positive effect upon supply. Help to Buy makes up to 20% of the cost of a newly built home available to first time buyers as an interest free (for the first five years) equity loan. This means that buyers only need a 5% cash deposit on a new build home. New research commissioned by the Department for Communities and Local Government found that:

"for every 100 households that purchased with Help to Buy Equity Loan assistance, 43 lead to new dwellings being built that would not otherwise have been built. This is equivalent to contributing 14% to total new build output since the introduction of the policy."

The authors found that 43% of Help-to-buy customers would not have been able to afford the property or a similar property without the policy. With the assumption that house sales lead to starts on at least a one to one basis, they conclude that Help to Buy has contributed directly to 14% of new build output since implementation. Crucially, these are homes which would not have been built in the absence of the policy.

This is a striking finding as Help to Buy is commonly assessed as a ‘demand-side’ rather than a ‘supply-side’ policy. Critics have argued that while it may help lift certain groups onto the housing ladder, it fails to address the fundamental problem: that there are not enough houses to go around. This research suggests that this analysis is, at least, too simplistic.

Equally though, these figures should be treated with caution. 

First, the authors do not appear to control for how Help to Buy has itself pushed up prices. Research from Shelter found that Help to Buy raised average UK house prices. As a consequence, the 43% estimate of customers who would not have been able to afford their property without Help to Buy may be excessive as some of these customers may have faced lower prices in the absence of the policy. 

Second, the assumption that housing sales lead to starts on a one to one basis is justified only by appealing to what developers report. While this may apply in the longer term, in the short term planning challenges and market conditions are likely to complicate this significantly.

David Kirkby is a Senior Research Fellow at Bright Blue, he tweets at @kirkbydj.